[Darren Boyle]

Originally Posted by andy110m

All resale/distribution businesses are basically all doing the same 3 things.

Buy it, Stock it and Sell it. Whatever the "it" is doesn't matter.

As Darren says profit is often seen as a dirty word because people concentrate on the mark up, or how much extra is being added to the price. They should look at the amount of money which is left when the related costs are taken from the sale.

The distribution business I work in, our SDA (sales, distribution and admin) costs run around 26%. I believe the industry average is around 25%, (Darren will need to tell me how he's got his down to 10% because I'm impressed if that's the case.)

So for us to make the return we want, 8%, we need to add 34% to the cost of an item. And lets say the cost is £10, the sum isn't +34% which makes the sales price £13.40, its £10 /0.66 which gives a gross profit of 34% and would make the price £15.15. Or in other words, 34% of the sales price is profit, from which we pay the costs and end with our 8% return.

Not massive is it? Using Darren's £9.99 example its means we've gone to the trouble to set up a business and all the work related to that to make 80p. Or scale it up to our actual 2013 number, we turned over £640 million and achieved a profit of £34 million. Great you might think but because larger deals happen at smaller margins we ended up with 5.4% return.

UK businesses face many challenges, mostly as someone said government imposed taxes and charges. Complaining at the shops isn't going to help because these guys aren't in it to get rich, of course they hope to make a living but we need to remember most shops have a hand in our clubs and keep the racing alive. Without them we don't have a hobby.

Very well said....

The only way we (and indeed any other model shop) can get down to around 10% running costs is in the following ways as a few examples...

• Smaller/cheaper premises than comparable business in other business sectors (Most model shops are small out of town affairs) very few (good ones) are in shopping centres or high profile high street locations compared to say sports shops and/or computer games stores fro instance
• Less staff - walk in a sports shop or GAME etc there will be 10-15 staff on average at all times, your average model shop with have just one or two on hand
• Less or no corporate advertising - you don't see many model shops advertising on TV or the national press, it is far more low key in this business

There are others, but these are all good examples....